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Amazon Crushes Estimates, Shares Soar

Amazon.comAmazon.com stunned investors on Thursday with first quarter 2012 earnings that beat consensus fourfold, and that vindicated CEO Jeff Bezos for his outsized investments. Analysts fretted about the substantial increases in spending on distribution centers, network infrastructure, digital devices and content on the back of what looked like slowing demand for e-products and pressure to profits. But in the quarter, higher revenues and lower-than-expected costs boosted profits at the giant online retailer. The upswing in guidance indicates a positive trend.

Amazon shares jumped 15% to $225 in afterhours trading, rising to a valuation of 70 times forward earnings. By comparison, the price-to-earnings ratio for the S&P 500 is 12 times and AppleApple trades at 13 times forward earnings.

Amazon’s net sales were $13.2 billion in the quarter compared with $10 billion a year ago, a 34% rise driven largely by sales of the Kindle Fire introduced in the fall. Consensus expectations for revenues were $12.9 billion. Operating income was $192 million compared with $322 million a year ago. EPS came in at a surprising $0.28, four times better than the consensus EPS estimates of $.07. Maria Bartiromo did a double take as she read the results on CNBC after the close.

Amazon’s stock is volatile as management makes surprise shifts in strategy with substantial capital investments and with long lags to positive cash flow. Amazon may be reaping benefits from previous investments.

Amazon spent in three main areas: warehouses for online retail; digital content, or e-books, games and videos; and network infrastructure for its cloud computing service. It’s new Kindle Fire, a tablet computer, competes with the new iPad from Apple. The Kindle Fire may sell at slight loss ; its volume and financials are not disclosed. Bears who contended that Amazon’s print-to-digital transition was slowing down clearly missed the mark. Sales of e-books, videos and games showed momentum, suggesting Amazon’s shift toward digital offerings was on the upswing and gaining traction.

Amazon is the number two content provider behind Apple, which dwarfs it with three times the revenue. Both companies sell content and devices in online stores, but Apple has a far wider ecosystem, better brand and deeper product line. Amazon launched an exclusive line of content (130 000 e-books) to differentiate its offerings and gain a competitive edge.

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These analysts are really becoming a bunch of morons. If they keep getting crushed like they did by the likes of Amazon and Apple, you have to ask if they really know what they’re doing or are they just pulling numbers out of their @$& to justify a salary. Hopefully, investors are not putting too much weight on their opinions…I know I’m not.

Amazon’s share price increase after earnings makes Apple’s share price gains look absolutely pathetic. I wonder what the Apple bulls have to say about that. Everyone talks about the almighty Apple machine and how much of a money-maker it is for shareholders. Apple’s share price after earnings shows a more compressed P/E than ever before whereas Amazon’s P/E has again expanded. The market took down Apple 15% right before earnings and gave back (including today) about 8% of share value back to shareholders. Amazon was taken down a few percent yet gave 15% directly to shareholders. No indications of profit-taking or any correction for Amazon.

So much for Apple being Wall Street’s favorite child. Obviously, Amazon doesn’t need huge margins for shareholders to be rewarded. Apple needs to find a way to run the company in such a way that Wall Street will give it a break like Amazon is getting with it’s 140+ P/E. It just seems to be constantly increasing as the weeks go by. Apple shareholders got totally pwn’d by Amazon.

” Apple needs to find a way to run the company in such a way that Wall Street will give it a break like Amazon is getting”

I’ve wondered if Apple bought Amazon what would the analysts do? Bring Applazon up, or bring it down? Does it depend upon who conducts the conference call and does it depend upon preferential meetings with specific analysts?

>>>”Amazon’s share price increase after earnings makes Apple’s share price gains look absolutely pathetic. I wonder what the Apple bulls have to say about that. Everyone talks about the almighty Apple machine and how much of a money-maker it is for shareholders…So much for Apple being Wall Street’s favorite child…Apple shareholders got totally pwn’d by Amazon.” <<<<<<

Crushing estimates, when earnings are less than a year ago, which were less than the year before that, is hardly wonderful. All it means is that management has been able to tell a nice story convincing analysts to lower the expectations bar low enough for them to jump over.

If one were to look at the numbers without the bias of analyst expectations, the raw numbers would be considered pathetic.

When Amazon grows up, it’d like its financials to look like Apple’s, and yet, even if we were to confine our view optimistically just to Amazon’s top line; while its rate of growth is healthy, it’s still not nearly as strong as Apple’s, a company of brobdingnagian size. If it’s going to ever catch up to Apple’s bottom line size, it first needs to grow its top line far faster than it currently is.

When will shareholders realize that while Amazon is a fine company, it will never fulfill the dream that has been spun that analysts seem to have bought? Let’s hope they aren’t left without a chair when the music stops.

Good. Jeff has some rather outre hobbies (10000 year clock, asteroid mining) that he needs stacks and stacks of money for. Sounds like I’m popping off, but I do wish him well in these things. They’ve got grandeur.

You have to be optimistic for Amazon – But what does AMZN success mean for WalMart? While Amazon is announcing great results, WalMart is fighting back government investigation for bribing foreign officials. Yikes, the other side of your story could be the downfall of WalMart – here’s the Forbes article http://onforb.es/I80PfV

The author wrote, “Amazon.com stunned investors on Thursday with first quarter 2012 earnings.”

I know I am certainly stunned. I am stunned at how a company that continues to be barely profitable and show only a moderate growth rate can have a trailing P/E of well over 100 and a forward P/E of 70. Stunning indeed…